Mercedes-Benz expects sales surge as realty, stock markets lift optimism

Mercedes-Benz on Monday launched the EQA, its most affordable and largest-selling electric vehicle globally, in India at an introductory price of  ₹66 lakh ex-showroom.
Mercedes-Benz on Monday launched the EQA, its most affordable and largest-selling electric vehicle globally, in India at an introductory price of 66 lakh ex-showroom.


  • Real estate developers, contractors and sub-contractors form close to 15% of the company's clientele.

New Delhi: India's wealthy are shelling out more money for luxury cars as growing real estate registrations for expensive houses and handsome financial market returns buoy sentiment, according to the top executive of Mercedes-Benz India, the country's largest luxury carmaker.

“Strong performances in the financial markets and record real estate consumption and registrations are creating a positive spending sentiment, with customers happier and more willing to invest in luxury cars like Mercedes-Benz," Santosh Iyer, managing director & chief executive officer, Mercedes-Benz India said in an interview. Real estate developers, contractors and sub-contractors form close to 15% of the company's clientele.

Iyer expects growth in sales for Mercedes-Benz cars, which is up 9% year-on-year (y-o-y) at just over 9,200 units in the first half of 2024, to move into double digits in the second half. “The festive season, wedding season, and September's depreciation benefits will likely see a surge in car purchases, driving a strong second half for the luxury car market," he said.

Comparatively, mass-market passenger vehicles grew at a modest 4% y-o-y in June.

Real estate activity was at a record for both office and residential sectors in the first half of 2024, according to property consulting firm Knight Frank India.

“H1 2024 has… racked up the highest ever transaction volumes in a half yearly period at 3.2 mn sq m (34.7 mn sq ft). Incidentally, this distinction was previously claimed by H2 2023 and the fact that the record was scaled in two successive periods showcases the growing strength of the Indian office market their best ever half yearly performances," a Knight Frank report said, adding that demand reached an 11-year high during H1 2024.

“At Landmark, almost 65% of our customers come from a business background, and from it, almost 19-20% from the real estate sector," Aryaman Thakker, executive director, Group Landmark, a listed auto retail chain, told Mint. “Definitely, with the real estate segment in most large cities doing well, the sentiment shows in luxury car buying."

The Stuttgart-based luxury carmaker on Monday launched its most affordable and largest-selling electric vehicle globally—the EQA—in India at an introductory price of 66 lakh ex-showroom, as well as a new five-seat configuration of the EQB SUV.

No more EV sales targets

Interestingly, while Mercedes-Benz expands its EV portfolio in India, it no longer has a firm EV penetration target like it did earlier. Till last year, the luxury carmaker had stated it expects up to a quarter of its sales to come from all-electric vehicles over the next five years. It had just over 2% EV penetration then. Now, with 5% of its sales coming from EVs, the company is leaving a lot more to the decision of its customers and the regulatory environment shaping the electric vehicle ecosystem.

“What we have realized in the last 12-18 months is that it is beyond just an OEM's wish [to sell more EVs]," said Iyer, adding that it also depends on customer acceptance and tax breaks from the Centre and states.

In particular, Iyer noted that EV sales tend to fall when tax incentives are withdrawn by a state. “That's why, while EVs today are a compelling proposition, with just 5% tax compared to 65% tax on IC-engine cars, this value proposition depends on external factors. So we, or anyone, cannot really put a timeline on what happens in terms of EV sales over the next few years."

Iyer also said that aggressive fuel efficiency norms could drive a greater focus on EVs in India.

“However, we will continue to develop IC (internal combustion) engine cars, but we want to be a carbon-neutral company across the value chain and will continue our capital allocation plans towards EVs. We will be strategically focused, tactically flexible," he said.

Seek policy continuity

“There is a delayed acceptance of EVs from customers. Everyone says their next car will be an EV. The question is, why not now?" Iyer said. “The bigger mass of customers is still hesitant to shift. It is more of a collective mentality—waiting for others to jump in. So the transition is a bit slower than we thought," he added, echoing the views of Sagree Sardien, the company's head for region overseas, which comprises markets such as India, Australia and South America.

“It (the demand growth) certainly hasn't gone the way the automotive industry wanted," Sardien had said earlier this March, adding that the company will look to provide an IC-engine variant for every EV offered to cater to this slow pace of adoption and offer customers the flexibility to choose a solution that works for them.

India is the fifth largest in Mercedes-Benz's overseas regions outside of North America, China and Europe, and has the potential to become the third largest market in the region over the next two to three years.

According to Iyer, zero road tax, toll tax exemption and long-term commitment on low GST on EVs will be imperative for the country to see the sustainable mobility transition happen faster.

“India is better placed because we have very high tax on combustion engines, which is not the case in other major markets. So instead of giving out incentives, which is what many other developed markets do, we are able to enjoy a lower tax structure which is helping price cars better. As a government, India is well-positioned to continue this for a longer period of time," Iyer said.


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